Nigeria’s economy remains in crisis zone as oil production drops

Following the drop in Nigeria’s total oil production, the International Monetary Fund (IMF) has said that despite relative stability in the price of crude oil at the international market, the country’s economy is still not out of danger yet, as returns on oil is not enough to push the much needed growth.

Nigeria’s crude oil production fell by 156,900 barrels per day (bpd) to 1.269 million bpd in March, from 1.426mbpd recorded in February. Consequently, the country lost its status as Africa’s top oil producer to Angola, according to latest data from the Organisation of Petroleum Exporting Countries (OPEC).

The Economic Counsellor and Director of Research, IMF, Maurice Obstfeld, while unveiling the world economic outlook on the sidelines of the ongoing IMF/World Bank Spring meetings in the United States, said Nigeria was still reeling under the challenges of 1.5 per cent contraction in 2016 and as such, must make serious adjustments.

The contractions, he noted, were due to disruptions in the oil sector coupled with foreign exchange, power and fuel shortages, some of which still remained unresolved.

Obstfeld pointed out that sub-Saharan Africa, over which Nigeria is a major influence, will witness a modest recovery this year, as its growth prospect has been projected to rise to 2.6 per cent in 2017 and 3.5 per cent in 2018, largely driven by specific factors in the largest economies, which faced challenging macroeconomic conditions in 2016.

The outlook for the region, however, remains subdued. Inflation in 2017 is expected to remain at double-digit levels in a few large economies like Nigeria, Angola and Ghana, reflecting, among other factors, the pass-through of large depreciations.

Obstfeld said that the economic upswing that has been expected for some time now could materialise in 2018, as the fund’s study raised global projection for 2017 to 3.5 per cent, up from a recently forecast of 3.4 per cent.

But the Chief of IMF’s World Economic Studies, Mrs. Oya Celasun advised Nigeria and other commodity-dependent nations to effectively diversify their revenue streams as a way out of the crisis.

Her words: “Many commodity exporters still need to adjust fully to structurally lower commodity revenues because commodity prices – the recent rebound notwithstanding – remain low, restraining stronger growth in Nigeria and other oil exporters within the Economic Community of Central African States.